2021 (9) TMI 125 - AT - Income Tax

Disallowance of deduction u/s 80IB(11A) - Nature of business of the assessee - business of processing, preservation and packaging of fruits or vegetables and the assessee received agricultural produce - AO observed that the assessee is involved in running cold storage for rental purposes and that it did not carry on integrated activities of handling, storage and transportation of goods, as per the audit report furnished by the assessee in Form No. 10CCB - HELD THAT - On perusal of the written submissions and entire documents available before us as well as from the financial statements, we do not find any entry towards transportation expenses debited by the assessee in the P L Account. If the assessee has paid to third parties towards transportation expenses, it must have been reflected in its books of account, but, there is no such expenses debited by the assessee in P L Account. If the assessee has undertaken transportation of food grains, there must be vehicle expenses debited in the account, but, no such expenses were found from the financial expenses. The submission of the assessee with regard to movement of goods from one place to other places is a normal activity within the cold storage area for keeping seeds at an appropriate place inside the cold storage - no substance in the submission of the ld. AR that expenditure towards transportation has been incurred. In the financial statements there is no expenditure is shown under the head petrol, diesel, oil and lubrications, maintenance, or vehicle hire charges, etc., which shows that the assessee has not incurred an expenditure towards petrol, diesel etc. for transportation of food grains. On perusal of tax audit report, the nature of the business activity of the assessee has been shown as cold storage services and in financial statements also as well as as per the orders of lower authorities, Form 10CCB also does not reflect that the assessee is carrying or engaged in the business of handling, storage and transportation of food grains and also not taking of any business of processing and packaging of goods or vegetables vide sl. Nos. 24(b) and 24(c) respectively. No doubt, the assessee is operating cold storage, but, other ingredients for eligibility of deduction is not satisfied. The assessee failed to establish that it had incurred expenses towards hamali charges and transportation of food grains. The case law relied upon by the assessee are distinguishable on facts to the case of the assessee. Res-judicata does not apply in this case. AR also failed to produce earlier AYs orders passed u/s 143(3) of the Act to show that any deduction was granted u/s 80IB(11A) - We do not find any infirmity in the order of the CIT(A) wherein he held that the assessee is not entitled for deduction u/s 80IB (11A) - Decided against assessee.

Issues Involved:
1. Eligibility for deduction under Section 80IB(11A) of the Income Tax Act, 1961.
2. Nature of business activities undertaken by the assessee.
3. Interpretation of the term "integrated business" as used in Section 80IB(11A).

Detailed Analysis:

1. Eligibility for Deduction under Section 80IB(11A) of the Act:
The primary issue is whether the assessee qualifies for the deduction under Section 80IB(11A). The assessee, a partnership firm engaged in cold storage services, claimed a deduction of ?70,14,288 under this section. The AO denied the claim, stating that the assessee only provided cold storage on a rental basis without engaging in the integrated activities of handling, storage, and transportation of food grains, as required by the statute.

2. Nature of Business Activities Undertaken by the Assessee:
The assessee contended that it was involved in the business of processing, preservation, and packaging of agricultural produce. However, the CIT(A) confirmed the AO's order, noting that the assessee's primary activity was letting out cold storage facilities for rent. The CIT(A) emphasized that the assessee did not engage in the integrated business activities stipulated under Section 80IB(11A). The audit report (Form No. 10CCB) and the agreement with M/s Syngenta India Limited further confirmed that the assessee was restricted to providing cold storage facilities on a rental basis.

3. Interpretation of the Term "Integrated Business":
Section 80IB(11A) specifies that the deduction is available for undertakings deriving profit from the integrated business of handling, storage, and transportation of food grains. The term "integrated" implies that all three activities must be carried out in a combined manner. The CIT(A) and ITAT found that the assessee did not fulfill these conditions, as it only provided storage services without handling or transportation. The financial statements did not reflect any expenses towards transportation or handling, further supporting this conclusion.

Findings and Conclusion:
- The assessee's claim for deduction under Section 80IB(11A) was denied because it did not engage in the integrated activities of handling, storage, and transportation of food grains.
- The assessee's business activity was limited to providing cold storage on a rental basis, which does not qualify for the deduction under the specified section.
- The ITAT upheld the CIT(A)'s order, confirming that the assessee is not entitled to the deduction under Section 80IB(11A).

Judgment:
The ITAT dismissed the appeals for AYs 2012-13 to 2014-15, upholding the CIT(A)'s decision that the assessee is not eligible for the deduction under Section 80IB(11A) due to non-fulfillment of the required conditions. The appeals were dismissed, and the order was pronounced in the open court on 24th August 2021.

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